'Red flags galore' in San Diego's audit of Qualcomm Stadium

If Chargers depart, S.D. owes $27 million

A recent audit of Qualcomm Stadium not only showed that the city is losing more than $12 million a year on its operations but pointed to deeper red ink ahead if the Chargers bolt after the 2010 season.

If that happens, the city would be left with debt of more than $27 million for stadium renovations made in 1998, no professional football team and an aging facility.

“I see this audit as a call to action,” Councilman Carl DeMaio said. “There are red flags galore.”

The report by the City Auditor's Office was released this month. It is scheduled to be heard by the city's Audit Committee June 1, at which recommendations – including creation of a business plan for the stadium – will be discussed.

City officials finally may have to focus on the future of Qualcomm Stadium.

Mayor Jerry Sanders and other officials have been content to watch the Chargers focus on getting a new stadium in Chula Vista for the past 18 months. Progress there is stalled, although the Chargers say they remain interested.

If the team moves to another location, the city would be able to take control of the 166-acre Mission Valley property and possibly make millions by selling it, leasing it or developing it.

The team is committed to playing at Qualcomm Stadium next season, but can explore a relocation deal with other cities between Feb. 1 and May 1 and in every succeeding year, until its lease with the city expires after the 2020 season.

As part of its exit agreement with the city, the Chargers must pay off all remaining debt from the 1998 renovations if the team leaves after this season or next season. Currently, that amount is $56.2 million.

After the 2010 season, the team could leave by paying $25.8 million, and the city would be responsible for the remaining $27.1 million.

“We hope to play there in 2010 – that's our goal,” said Mark Fabiani, the Chargers general counsel and spokesman on the stadium issue.

Beyond that?

“I can't foresee the future,” Fabiani said. “I don't have a crystal ball, but, as I've said before, we're closer to the end of this thing than the beginning.”

To operate Qualcomm Stadium, the city has spent millions more than what the 42-year-old facility generates in revenue. In 2006, the deficit was $8.6 million; in 2007, $6.8 million; in 2008, $13.6 million. This year the deficit is projected to be $12.4 million.

The city is mostly using hotel room tax revenue that otherwise would go to the city's general fund to pay for police, fire and other daily operations.

“Every dollar we spend at Qualcomm could be used somewhere else,” said Councilman Kevin Faulconer, chairman of the Audit Committee. “That's why we need to make sure Qualcomm runs as efficiently as possible, and why we need a business plan for where we are now and what prospects we have for the future.”

With the the Chargers moving closer to the time the team can leave town for a discounted price, Faulconer said talks on the stadium's future should “begin now rather than a couple of years from now.”

Sanders did not return a call seeking comment about the audit.

Darren Pudgil, a Sanders spokesman, said the mayor agrees with the content of a six-page response to the audit by Jim Barwick, director of the city's real estate assets department. Barwick said a business and marketing plan for the stadium would be prepared for the mayor and council in six to nine months.

“The fact that the contract is not a good deal for taxpayers is the least-kept secret in town,” said Pudgil, referring to the Chargers lease. “It predates this mayor, and there is little we can do about it.”

The city has been trying to attract more revenue-generating events to the stadium – from concerts, to Supercross to tractor pulls – but those efforts have lagged in the hard-hit economy, city officials said.

Fabiani said the audit makes the case the Chargers have been making for seven years – that the city is spending an enormous amount of money on an aging stadium and losing potential millions in sale or development of the property. He said that if a new stadium site includes a pad for a new sports arena, the city would have about 250 acres of potential new revenue.

“There should be a better solution,” Fabiani said.

DeMaio said the audit shows something entirely different.

“What the audit shows is that Fabiani and his friends were very good at shaking us down,” DeMaio said. “I'll bluntly admit that it's not the Chargers' problem. They asked for the world and the politicians gave them the sun, the moon and the solar system.”

DeMaio is referring to the team's renegotiation of its Qualcomm Stadium lease in 2004.

At the time, the team agreed to drop a much-reviled “ticket guarantee,” in which the city had agreed to pay for unsold home game tickets – an amount that reached $36.4 million between 1995 and 2003 – in exchange for several concessions, including payment should the team depart.

Another concession was to allow the team to pay a flat $2.5 million in rent annually. Under the old contract, the annual rent would have increased in 2007 to $7.2 million and up to $9.9 million by the time the lease expired.

That wouldn't have covered the city's operating deficit, but would have significantly closed the gap.

“Unfortunately, we've got a lopsided lease,” said Councilwoman Donna Frye, who opposed the 2004 agreement. “I believed the deal wasn't in the public's best interest, and the evidence is before us today.”